Your credit card obligation is your bank’s asset

Poor Citigroup. It appears the banking juggernaut suffers from an epidemic of wise consumers who have actually chosen to pay down their Sears credit cards, creating what the company calls a “‘real drag'” on the bank’s portfolio. While it focuses on Citigroup’s woes since acquiring the Sears credit card portfolio, a recent Wall Street Journal “Citigroup’s Sears Problem”, Jan. 30, 2007) report coincidentally highlights how Citigroup’s value to Wall Street is built on the backs of their credit card holders.

With Wal-Mart scheduled to introduce a no-fee credit card in March, it’s
clear that businesses want to cash in on the credit-card boom and entice
their customers with easy credit so that their own “assets” — the credit
card liability of their customers — makes them more valuable. The trend is
disturbing. For the last three decades, families with incomes of $80K and up
have watched their credit card balances increase 10,000 %. In June 2006,
the Federal Reserve Board announced that consumer credit rose $10.3 billion
to $2.19 trillion following a revised $5.89 billion increase in May 2006 –
the biggest two-month gain since September-October 2004.
Next time you get an offer from a bank to increase your credit just keep
this in mind. Rather than help you overcome what you think is a short term
cash problem, remember that they are really offering to increase your liability
obligations to them — and enriching themselves in the process.